With Spanish banking woes so prominent see article , there is a danger of bank runs as citizens of vulnerable economies fear ending up with devalued deposits. Such runs would become much more likely after a Greek exit, but it is possible that they could start before one, and indeed precipitate it—possibly the worst of all bad options.
If confined to relatively small economies like already bailed-out Ireland and Portugal this might be manageable. In an economy the size of Spain's or Italy's they would be a terrible danger. The permanent rescue facility, the European Stability Mechanism ESM is due to start in July, but has not yet been ratified by several countries, notably Germany. Beyond the adequacy or otherwise of the funds' size, there is the problem of what they can be spent on.
If they were used to bail out commercial banks directly, they could break the pernicious circle in which unstable banks use the debt of barely solvent governments to shore themselves up.follow
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To free them in this way would require both agreements to be ratified again, a politically risky and time-consuming process. That leaves the ECB as the last bulwark. It could buy bonds again, but this tactic would be less effective than before unless it dropped its insistence on being protected against any future haircut. If it does not, bond investors will regard every purchase it makes as pushing them down the pecking order, thus reducing any residual appetite they might have.
Muḥammad Rashīd Riḍā’s Reformist Project to Establish a True Caliphate: Prospects and Challenges
It could also provide near unlimited liquidity through yet another huge long term refinancing operation. But this would involve loosening its collateral conditions and exposing the central banks to greater and greater risk. If neither the rescue funds nor the ECB can do enough, a wider break-up might ensue, with huge costs all around. Mr Cliffe says that a disintegration of the euro would be catastrophic even for core Europe, with first-year output losses of 8. This time Germany would not be spared, incurring a GDP loss of 8.
Across the former euro area, there would be a wave of bankruptcies as firms suddenly found themselves either owed money in a depreciating currency or owing money in an appreciating one. Currency unions have cracked before, but none with the scale, ambition or interconnectedness of the euro area. Contemplating the dread consequences of such a disintegration may yet prompt concessions from both Greece and its creditors that prevent the worst happening.
But can the level of fear be adequate to engender such a change of heart while not so powerful as to trigger panic? Again, the prognosis is uncertain. THE huge crowd gathered in Place de la Bastille had to wait until late into the night before it actually glimpsed in the flesh the man it had come to celebrate. Only after this low-key provincial start did Mr Hollande hop onto a specially chartered jet and head for the capital, where his supporters were being entertained by an assortment of French rock stars. When, a little after midnight, Mr Hollande at last appeared on the stage at the Bastille a huge cheer went up.
It is a remarkable achievement for a politician who, before Dominique Strauss-Kahn was ruled out by a sex scandal a year ago, was not taken seriously as a presidential hopeful. Since then, the longtime party hack, who has never held ministerial office, has overcome both a divided party and a bland public image to secure the top job. But quite what that change means, both in France and in Europe, is rather less clear. Mr Hollande intends to press this demand at his first meeting with Mrs Merkel, which will take place immediately after his inauguration on May 15th.
Hello world. Yet, in reality, the French vote was not simply a rejection of austerity. Voters were fed up with job losses and the recession, certainly. But they were even more fed up with Mr Sarkozy. He has not wavered over this—a first for a Socialist candidate.
Although he says that he will postpone balancing the budget until , a year later than Mr Sarkozy had planned, not once has he advocated a deficit-financed stimulus for the French economy. Where he has been—perhaps deliberately—vague is over how he will achieve this. Balancing the books will be even harder if growth disappoints, as seems likely; Mr Hollande reckons on 1. In other words, although this is not quite what Mr Hollande told the voters, it looks likely that he will have to implement a form of austerity. Tough budget choices will be put off until a public-finances audit by the Cour des Comptes, rather conveniently due a few weeks after the parliamentary elections on June 10th and 17th.
If it concludes that the hole in the budget is worse than expected, Mr Hollande will have a pretext for postponing spending pledged in the election, and perhaps making deeper cuts than his campaigning suggested. If Mr Hollande wins a working majority in the elections—as seems likely, not least because Mr Sarkozy's decision immediately to quit politics has left the right in disarray—he will have a remarkably powerful domestic position. The Socialists already have control of the Senate, all but one of the country's 22 regions, every big city and most communes.
An important first step towards that victory is forming a relationship with the German chancellor, Mrs Merkel, that establishes him as a constructive force for change in Europe see Charlemagne. The spiritual son of Jacques Delors, champion of European integration, Mr Hollande knows full well the need for a strong Franco-German friendship.
This is why the front-runner for the job as interim prime minister, which Mr Hollande will announce on May 15th, is Jean-Marc Ayrault, the loyal year-old head of the Socialist parliamentary group, who has good links in Germany. On the face of it, Mr Hollande stands little chance of securing change to the treaty itself. The quick fix of deficit spending just makes things worse. Germans think the financial markets vindicate this view. After Mariano Rajoy, Spain's prime minister, said in March that Spain would miss its fiscal target this year, yields on its bonds jumped.
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With its credit rating already downgraded, France risks similar punishment if Mr Hollande strays from austerity. Moreover, Germany would refuse some of Mr Hollande's longer-term ideas: to allow the European Central Bank to lend directly to states, or to create Eurobonds which the euro zone as a whole would stand behind.
But Mr Hollande's more immediate requests may meet less resistance, as they are less far-reaching. To strengthen his hand with Germany, Mr Hollande's advisers say that he will promise quickly to pass a balanced-budget rule in France. Mrs Merkel's domestic concerns may help Mr Hollande make his case. On May 6th a state election in Schleswig-Holstein strengthened opposition parties whose pro-growth rhetoric echoes that of the new French president.
Mr Ayrault's friends in Germany's opposition Social Democratic Party want growth-friendly add-ons as a condition of supporting the fiscal compact. That support is necessary because approving the compact will require a two-thirds majority in the Bundestag when it votes, probably next month. She would support a Europe-wide financial-transactions tax. This would seem to offer a compromise which would leave the two leaders happy.
Both are sober and methodical, and thus a better match for each other than Mr Sarkozy was for Mrs Merkel.
The Form of Islamic Government
But there is a large Greek fly in the ointment. Mrs Merkel is adamant that there is no option for Greece but to follow the strictures of the previously agreed bail-out package, or go under. Mr Hollande's position is still unclear. If he agrees with her, what price his position as a new European counterweight, let alone his credibility at home as a man opposed to doctrinaire austerity?
But if he disagrees, a rift opens up at the heart of Europe. Since then America has introduced sanctions that target Iran's central bank, the country's main conduit for oil transactions, by penalising any foreign financial institutions doing business with it. For its part, the European Union has imposed an embargo on Iranian oil. The full force of the sanctions on the central bank will also not be felt until the second half of the year.
However, the International Energy Agency IEA , a rich-world energy consumers' club, says that European customers have already stopped buying Iranian crude and that Asian buyers are looking elsewhere. That blunts Iran's recent announcement of an embargo of its own, against Britain and France see article.
And countries, such as China and India, that continue to buy Iranian oil, will be able to extract discounts. Up to now, sanctions have failed in their main political objective—to persuade Iran to change course by committing itself to verifiably peaceful nuclear development. But the ratcheting up of sanctions is taking its toll on the country's creaking economy. The Iranian rial has lost half its value since December, despite attempts by the regime to prop it up. There are reports of food shortages, hoarding and a drying up of investment. In late December Iran's president, Mahmoud Ahmadinejad, admitted to the majlis , Iran's parliament, that the country was in effect shut out of the international banking system.
In anticipation of pressure to come, SWIFT, the Society for Worldwide International Financial Telecommunication, based in Belgium, announced this month that it was preparing to blacklist Iran from the system banks use for wire transactions. Judging the way Iran's leaders will respond is difficult.
In the past Iran has found clever ways to circumvent an array of less formidable sanctions. Some Israelis concede that this time it may be different. There is also disquiet that is threatening the regime. We are seeing reactions that are in some ways hysterical. And the idea that they might eventually work remains doubtful to people who believe that the time in which Israel can act in its own defence is running out. EVER since the euro zone's sovereign-debt crisis began in earnest two years ago, the common fear has been that the sheer bulk of Italy meant it was too big for other countries to bail out, should it sink.
A quieter hope was that Italy's size might also save it. If investors rushed out of Italian bonds, went the whispered argument, there were few big markets where they could then park their euros and still get a decent return the smaller German bond market could not accommodate everyone without yields falling sharply. Scared investors often rush into the big and liquid market for US Treasuries, despite anxieties about America's public finances. That safety-in-numbers logic ought to keep Italy from trouble, too.
Some hope: Italian bonds are now a badge of shame for banks who are rushing to dispose of them see article. For some this proves that Italy is an oversize Greece: a country with a debt burden that is too heavy for it to bear and, unlike Greece, for others to help shoulder. There are uncomfortable parallels. Both countries' public debts have long been bigger than their annual GDP.
Both suffer crippling rigidities in their economies. Start with the finances. One reason why markets eventually shunned Greece, Portugal and Ireland was the uncertainty about how far their debts might rise. All three had huge budget deficits so were adding to their debts at an alarming rate and were struggling to keep their economies on track, while at the same time cutting spending and raising taxes. Italy has fewer foreign debts than the other troubled euro-zone countries, as it ran only modest current-account deficits in the boom years.
Indeed Italy's overall private-sector debts are modest by rich-country standards. This matters for the nation's solvency. If less wealth goes outside Italy to service foreign debts, more is left to tax. The healthy rate of Italian household saving underpinning this could be tapped by the government as an alternative to bond-market funding, which looks a lost cause. Because Italy's deficit is fairly small and the average maturity of the bonds it has already issued is quite long around seven years , it would take a while for higher borrowing costs to make a huge difference to its interest payments.
Assuming all new debt is priced at 7. Italy's debt could be capped, but could it ever be reduced to a more comfortable level? Bold privatisation would go some way, but in the long run what is needed is faster GDP growth. The average Italian was worse off in than in GDP per head fell over the decade see chart. Outsiders point to the lost option of devaluation to explain Italy's funk. But the root cause of Italy's lost export competitiveness is its dismal productivity growth.
The deeper causes of weak productivity are a two-tier jobs market, which protects the jobs of older workers in dying industries but traps youngsters in temporary work; the industry-wide wage bargains that mean businesses cannot match wages to productivity; the closed-shop professions and trades that are a barrier to innovation and efficiency; and so on.
Italy still has some world-class firms and brands, and an exporting prowess that could be built on. Yet it does not have enough firms of sufficient scale. The ubiquity of micro family businesses is related to Italy's rigid regulations, as are its tax-collecting problems. Small firms fall below the regulatory thresholds and are less often attached to the formal economy.
If Italy is to carry its outsize public debts, it urgently needs to promote an environment where big businesses can flourish. Free download. Book file PDF easily for everyone and every device. This Book have some digital formats such us :paperbook, ebook, kindle, epub, fb2 and another formats. The Caliphate Question examines British governmental files from the early to the past approach of British policy-makers to questions of Islamic governance.
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Add to Basket. Book Description Rowman and Littlefield Publishers. Condition: New. Brand New. Seller Inventory More information about this seller Contact this seller. Book Description Lexington Books. Book Description Lexington Books, Condition: Brand New. This item is printed on demand. Seller Inventory zk Language: English. Brand new Book. The Caliphate Question examines British governmental files from the early to mid-twentieth century to examine the past approach of British policy-makers to questions of Islamic governance, particularly in relation to the office of the Caliph.
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